Filipinos Are Taking More Calls in Outsourcing Boom

New employees at a call center in Manila receive training. There are now 100 call centers in the Philippines.

By DONALD GREENLEES – MANILA â€” As India moves up-market in outsourcing, the Philippines is quickly gaining a share of the customer-service call center business. It may be a low-end, low-margin business, but for the Philippines it has been an employment boon.

Evidence of that sharp growth is on display early in the evening in the lobby of the RCBC Plaza building in Makati City, the main financial district of Manila.

Clutches of young men and women, Starbucks coffee and McDonaldâ€™s bags in hand, head to work at more than a dozen call centers serving the United States, just as other workers are heading home.

On a recent trip to Hong Kong to drum up investor interest, President Gloria Macapagal Arroyo noted that there were barely 2,000 people in the so-called business process outsourcing industry when she gave her first State of the Nation address in 2001.

â€œToday, five years later, it is 100 times bigger â€” we have 200,000 workers there,â€ she said at a news briefing. â€œAnd every B.P.O. company that I meet is looking to double their work force.â€

A recent study released by Duke University and the consulting firm Booz Allen Hamilton found that India was still the preferred destination for American companies seeking to outsource, named by 42 percent of companies surveyed.

This is at a time when American companies are increasingly going abroad to perform â€œsophisticated, mission-critical functions,â€ the study found, because of a shortage of highly educated professionals in developed countries.

Outsourcing operations in India are thus producing better-paying types of jobs, like product research and development, financial analysis and handling insurance claims and payrolls. In India, there is undeniable logic in chasing deals with higher profit margins, especially as costs and competition rise in the call center business.

And those companies seeking cheaper alternatives for basic services have discovered the Philippines. For companies, the countryâ€™s appeal, aside from lower costs, include cultural similarities to the United States and employee loyalty.

With a long history of contact with the United States, including several decades of American colonial rule, Filipinos are more attuned to Western culture than most Asians are. Call center employees not only find it easy to relate to Westerners but are also quick to adapt to a variety of accents. Most call center employees receive intensive training to acquire the accent of the customers they will be talking to.

â€œI have relatives in California, so I am familiar with the way they speak,â€ said Jessica Cauilan, 37, a Manila native who works overnight shifts trying to persuade bank customers in the United States to make payments on late credit card bills. Her call center company, IRMC, based in New York, has several such contracts with big consumer credit issuers.

The call center business is the fastest growing industry in the Philippines, growing last year by 90 percent as revenue reached $1.7 billion. More than 100 centers around the country have created a new class of relatively affluent and independent young Filipinos.

But growth in the industry has put such skilled employees in high demand, driving up competition and labor costs.

In India, the poaching of employees is behind an increase of about 50 percent in labor costs, according to outsourcing companies. They say turnover of staff in some call centers in India has been as high as 200 percent a year.

Filipino companies have turnover rates of 40 percent or lower.

â€œThe longer you have an employee, the higher the quality they are going to deliver,â€ said Clint Streit, executive vice president for global operations at Convergys, an outsourcing company based in Cincinnati. â€œFrom that point, the Philippines has a clear advantage over India.â€ He added: â€œUltimately we have to stem attrition rates in India, otherwise switch to the Philippines.â€

Outsourcing company executives say that trend will ensure more call center operations are attracted to the Philippines.

â€œThere are the lowest unit costs, the highest quality and the lowest attrition of any centers in the world,â€ said Vikas Kapoor, chief executive of IRMC. â€œIt is well placed not only to compete, but to dominate in the sector.â€

IRMC started its Philippine operations in February 2005. By early 2007, the company estimates, it will have 1,000 employees. Convergys has hired 9,500 people in the first three years of its operations.

â€œWe will be doubling the size of our business over the next three to five years,â€ Mr. Streit, of Convergys, said.

Sheryl Lapuz, an IRMC employee with a degree from the University of the Philippines, said the combination of good wages and a modern workplace made it easy for call centers to attract qualified staff. â€œItâ€™s the â€˜in jobâ€™ in the country right now,â€ she said.

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